Trump’s student loan policies could help students more than we expect

It’s a $1.3 trillion question: What will a Trump presidency mean for student loans?

At GW, however, it might only be a few thousand dollar question. About 43 percent of undergraduate students at the University defray the hefty cost of tuition by taking out either private or federally funded student loans. After four years, the average GW student is $34,000 in debt – which is at least $1,000 below the national average.

Unfortunately it’s hard to know where student loan policy is heading with the new administration. President-elect Donald Trump’s website says little about helping students pay for college. But at a GOP rally in Cleveland, Trump assured students that his administration will “work it out big-league” with some of the most liberal programs since the inception of federal aid in the 1950’s. Not only is Trump’s plan a liberal policy, it might be even more liberal than the current Obama student debt plan.

GW students shouldn’t fear when applying for student loans for Fall 2017 because come next spring, they might start to benefit from more generous federal aid policies. Until Trump’s inauguration in January, however, there are a few things GW students need to consider about the future of their student loans, including repayment plans and private loan options.

Currently, once students graduate, they can opt into an income-driven repayment plan where federal loan payments are capped at a percentage of one’s income for a set period of time. After that time has elapsed, all debt is forgiven. Trump’s ideas for income repayment plans include an adjusted percentage that only differs slightly from the current numbers of the Obama Administration. Under Trump’s possible modifications, borrowers would be required to pay 12.5 percent of their income over 15 years, a minuscule amount above the current 10 percent over 20 years plan. And after 15 years, Trump says, “We’ll let them get on with their lives.”

These numbers can be a bit confusing, but consider two types of borrowers: One borrower has a student loan balance of $70,000 and a relatively high income. He or she would pay the full loan balance under Obama’s 20 year repayment cycle, but the Trump administration would forgive a little more than $4,000 after 15 years had passed. Borrower two has a larger student loan balance of $100,000 and a higher income than borrower one. Trump’s plan would forgive about $25,000 of their debt, whereas the Obama administration only forgives about $19,000.

This new repayment plan is good news for high-borrowing GW students, like graduate students, who are likely to have more of their debt forgiven under Trump than under Obama. But Trump’s plan will likely have a negligible impact on those students who just borrow an average amount. While students aren’t complaining about a possible increase in debt forgiveness, hardline Republicans are. Because the remaining balance would eventually have to be paid by someone, the government would end up footing the bill.

Perhaps the most controversial Trump college affordability proposal is to eliminate federally funded student loans altogether. Sam Clovis, the national co-chairman and policy director of Trump’s campaign, said that the Trump camp wants to remove the government from lending and leave students at the mercy of banks and private lenders. Although students would lose the generous repayment options and low interest rates associated with federal loans, advocates of this market-driven approach argue that higher interest rates would lessen instances of overborrowing.

Ultimately, the only surefire way to lower student debt is to cut the cost of college tuition. Universities like GW might see a decrease in the cost of attendance as a result of two proposals by Trump’s team. First, Trump has always been a proponent of “risk sharing” with student debt – the idea that colleges should also have some financial responsibility if a portion of their students defaulted on their loans. Historically, both Republicans and Democrats have gotten behind this policy because, if colleges had more “skin in the game,” they might lower their costs of attendance. Second, Trump has also said that universities shouldn’t sit on their “multibillion dollar endowments” and instead should designate those dollars to helping students with tuition. Otherwise, Trump plans on working with Congress to ensure that universities lose their federal tax breaks.

“These universities use the money to pay their administrators, to put donors names on their buildings, or just store the money, keep it and invest it,” Trump said at a rally. “In fact, many universities spend more on private equity fund managers than on tuition programs.”

Firm policies on college tuition and student loans are still to come from the Trump administration, and students across the country are anxiously awaiting them like a late admissions letter. Of course we should stay vigilant and make sure these policies are in the best interest of student borrowers, but after hearing Trump’s free-handed proposals for loan repayment and endowment restrictions on the campaign trail, I hope not to experience the same sticker shock when applying for student loans this spring.

Sydney Erhardt, a sophomore majoring in international affairs, is a Hatchet opinions writer. Want to respond to this piece? Submit a letter to the editor.

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